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Durables Drop In August

Jan 13, 2005

ByJohn S. McClenahen In a reversal from July, manufacturers in the U.S. didn't sell a lot of commercial airplanes in August and, as a result, new orders for manufactured durable goods dropped 0.5% last month to $195.4 billion, the U.S. Commerce Department reported on Sept. 24. Excluding transportation, the statistical category that includes aircraft, new orders for durables, big-ticket items designed to last three years or more, rose 2.3% in August. "The fact that orders outside transportation accelerated to their strongest pace in five months is an encouraging sign and confirms that a broad-based manufacturing recovery remains on track," says David Huether, chief economist at the National Association of Manufacturers, Washington, D.C. "New orders for computers, electrical equipment [and] fabricated metals all posted healthy gains in August," he notes. However, pointing out that new orders for nondefense capital goods excluding aircraft, the so-called core durables new order number, declined 0.5% last month, Merrill Lynch & Co. suggests capital expenditures may soften in the final quarter of this year. "The sizable spare capacity in the economy simply does not justify expanding capacity at this time. Instead, the capital investment currently taking place remains part of a replacement cycle, restrained by elevated business uncertainty . . . ," says the New York-based securities firm.